Wall Street Extends Rally as Fed-Cut Odds Strengthen and Alphabet Challenges Nvidia

 US equities climbed for a third straight session on Tuesday as traders increased their conviction that the Federal Reserve will cut interest rates in December. Alphabet’s gains also sharpened attention on the shifting competitive landscape within the artificial intelligence sector, adding pressure on Nvidia.

The S&P 500 rose 0.9%, while the Nasdaq 100 gained 0.6%, recovering from an intraday drop of as much as 1.3%. Market volatility remained contained, with the VIX hovering near 19.

Breadth improved across the board. The equal-weighted S&P 500 advanced 1.5%, reflecting broad-based buying, while the small-cap Russell 2000 outperformed with a 2.1% jump.

Weaker US Data Fuels Policy Bets

After a delay caused by the federal government shutdown, September economic data finally began to roll out. Retail sales posted only modest growth, hinting that consumers are pulling back after months of strong spending. Wholesale inflation picked up on higher energy and food prices, while consumer goods prices saw incremental gains.

“Downbeat economic data is delivering gains to stock and bond bulls alike,” said José Torres of Interactive Brokers, noting that weaker retail sales and consumer confidence data are emerging alongside accelerating job losses and rising expectations for a December rate cut.

Bellwether Wealth’s Clark Bellin added that although the data is stale, it remains the only set of indicators available for policymakers ahead of next month’s meeting. Swaps markets show traders have nearly fully priced in a rate cut.

Brian Jacobsen of Annex Wealth Management noted that a pause on policy easing would risk undermining sentiment. “Powell doesn’t need to be the Grinch that stole Christmas,” he said.

Treasuries rallied further, with yields extending their slide as traders priced in a higher probability of near-term easing.

Alphabet–Nvidia Dynamics Shift in AI Trade

Alphabet shares rose 1.5% after reports surfaced that Meta is in discussions to spend billions on Google’s AI chips. Nvidia fell 2.6%, giving back Monday’s gains and drawing renewed focus to the sector’s valuations.

“Nvidia’s dominant position is unlikely to be fundamentally threatened in the short term, but expectations matter, and Alphabet appears poised to capture share,” said Chris Beauchamp of IG.

The move in Alphabet shares could reshape the upper tier of the world’s most valuable companies. It also comes as stretched valuations in the AI space spark heightened scrutiny.

Matt Maley of Miller Tabak warned that Nvidia’s post-earnings performance remains a concern for bullish investors. “Given its heavy weighting in major indices and key tech ETFs, Nvidia’s poor action is definitely something to watch,” he said.

Notable Movers

Banks rose after the Federal Deposit Insurance Corporation adjusted leverage ratio requirements, effectively lowering capital constraints.

Kohl’s Corp surged 43% after raising its full-year outlook for the second consecutive quarter.

Abercrombie & Fitch jumped 38% after lifting the lower end of its 2026 guidance for revenue and earnings per share.

Amentum Holdings rallied following fourth-quarter revenue growth.

Oracle Corp declined after CFRA cut its rating to “hold” from “buy,” citing rising debt concerns.